Picking up the pieces

Picking up the pieces

Before we get to our J P Morgan warp up piece would like to take a moment to review what MannKind (NASDAQ: MNKD) said yesterday during their presentation and subsequent question and answer session. First we want to commend newly appointed CEO Matt Pfeffer for his candor and transparency. As everyone knows just days before JPM the company announced that Duane DeSisto would NOT be taking the CEO position. Just days before that came the news that Sanofi (NYSE: SNY) would be terminating their partnership agreement with the company. Even with recent uptick shares of MannKind have fallen over 37% over the past 30 days.

Frankly we were surprised that Mr. Pfeffer was even coherent as no one would have blamed him one bit if he sounded just a little shell shocked.

Here is the basic strategy for the new “unshackled” MannKind;

  1. Lower the price for Afrezza
  2. Conserve cash wherever possible
  3. Generate cash any way possible

Mr. Pfeffer was adamant that MannKind is not dead yet and he will do whatever he can to insure that Afrezza remains available to the patients who are using it. He was also refreshingly realistic about the many issues facing MannKind. Equally refreshing was his attitude towards his ex-partner Sanofi – while he could have easily thrown Sanofi under the bus, blaming them for creating the problems he now must deal with he for the most took the high road.

Although he never directly stated that Sanofi failed to execute or that Sanofi was clueless as to how market a product like Afrezza, the inference was clear. As we have said many times and Afrezza is just another example of this when it comes to diabetes products not named Lantus Sanofi couldn’t hit water if they feel off the Queen Mary in the middle of the ocean.

The question is even with this new and refreshing attitude will Mr. Pfeffer have the time to pick up all the pieces and put humpty dumpty back together again. While he noted that MannKind has enough cash to get into the second half of the year he was also clear that should this turnaround not yield some quick results the longer term viability of MannKind comes into question.

With a market cap of less than $400 million one could reason that MannKind is an attractive relatively cheap acquisition target.  However, on the flip side as one analyst noted during the Q&A if Sanofi couldn’t make this work what makes the company believe someone else can. Before we look at that question a quick point here as this question shows that many analysts are really no different than the MannKind/Afrezza zealots on Twitter. It amazes Diabetic Investor that in spite of numerous well known failures in diabetes – iBGStar- Apidra and now Afrezza – that people still think Sanofi knows what they are doing.

Now as to whether another company can succeed where Sanofi failed the answer is a matter of expectations.  The reality is Afrezza is what we said it is nothing more than a niche product. Even with better formulary position Afrezza will NEVER achieve blockbuster status. Should a new partner accept this fact and realize Afrezza’s limitations then yes we could see another company come along and partner or perhaps buy MannKind.

Still given the very serious issues facing the company a possible partner and/or suitor could just be patient and let nature take its course. Should MannKind be able to license the Technosphere technology or develop their non-diabetes pipeline someone could always step in and make a bid. Yet, should these efforts either take longer than the company anticipates or worse should they fail to materialize the company would have little choice but to consider bankruptcy or liquidation.

No matter what happens with MannKind and to be honest we truly hope Afrezza does not go away as there are patients using the product who really like it. The MannKind/Afrezza debacle should prove once and for all that our wine drinking friends in France should stick to things they know something about. That for everyone who thinks Toujeo or LixiLan will be a hit – think again. Same goes for the much hyped partnership with Google – if Sanofi has proved anything over and over again it’s when it comes to partnerships about the only thing their good at is screwing them up. MannKind now joins Medtronic (NYSE: MDT) and AgaMatrix who also partnered with Sanofi only to see these once hyped partnerships fall apart.

When Mr. Pfeffer said now that MannKind is “unshackled” from Sanofi they could do better he wasn’t kidding. The issue is will he have the time to disinfect from the stench Sanofi left behind. Can he repair the damage inflicted by Sanofi? Can he unlike the all the king’s horses and all the king’s men put humpty dumpty back together again? Frankly we aren’t optimistic but we are rooting for him. Good luck Mr. Pfeffer your going to need it.